Tuesday Morning Livestock Market Update - Traders May Begin Week With Caution

GENERAL COMMENTS:

Cattle futures adjusted both for the long holiday weekend and to move in line with cash. Some traders continue to not believe cattle prices will decline very much as packers will need to step up soon as they may become short-bought on cattle. Slower summer demand has allowed them to hold back on slaughter and improve margins, but there may come a time they will need to purchase more aggressively. Steady to lower cash last week may carry over as feedlots may need to move cattle as it is costing money to hold for no better cash or lower cash. Boxed beef prices were higher Friday with choice up $0.70 and select up $1.04. The Commitment of Traders report showed fund traders increasing their long positions by 4,321 futures contracts, bringing their net-long positions to 94,715 contracts for live cattle. They increased their net-long positions in feeder cattle by 2,775 contracts, bringing their net-long positions to 14,663.

Hogs had a good week with futures closing higher from the previous Friday. Optimism rippled through the market last week despite cash struggling much of the time. The National Direct Afternoon report showed cash down $0.07. Strength in cutouts during the second half of the week provided support to round out the week higher. On Friday, cutouts gained $1.48 with a strong slaughter pace. Traders will watch to see the evidence of demand over the weekend as store shelves will need to be restocked. Packers may purchase hogs more aggressively Tuesday, improving cash as there is one less day this week to take care of business. The Commitment of Traders report showed fund traders increasing their long positions by 5,147 contracts, bringing their net-long futures positions to 27,649 contracts.

	BULL SIDE		BEAR SIDE
1)	Boxed beef has been stronger, improving packer margins and indicating consumer demand is good.	1)	Packers continue to work the market to their advantage and with a seasonal lull in beef demand, they will reduce slaughter, requiring less cattle to be purchased.
2)	Cattle futures are holding in a sideway pattern despite lower cash the past few weeks. Traders are optimistic demand will improve as time progresses.	2)	Feedlots have been holding cattle in hopes of higher cash, but all it has done is cost more money as they have fed them longer and have been receiving less for their labors. They may be willing to sell this week.
3)	Hog futures held well despite lower cash for the week. Demand is expected to have been good over the extended weekend with retail needing to restock early this week.	3)	Cash has not been able to provide solid support under the hog market. Further upside price potential might be limited.
4)	Packers may step up more aggressively as they have one less day this week to procure the hogs they need. This should provide further support to futures.	4)	It is a shorter slaughter week, which may limit the volume of hogs packers will be purchasing. This may leave them less aggressive.